The financial press has for the most part looked at the possibility of sovereign debt crises in Greece, Spain, and Portugal through a deal-making window: will Germany and other EU surplus countries back a rescue package, and if so, with what strings attached? There has certainly been ample speculation, particularly since a bailout of Greece would be wildly unpopular in Germany, but some have though various finesseses, such as having various EU members guarantee Greek debt, along with imposing austerity measures (in particularl, raising the retirement age in short order from age 61 to 67) might be workable.

But even if a deal could be brokered, will the citizens accept it? Citizens in Greece could be every bit as big a stumbling block as those in Germany. From the Globe and Mail (hat tip reader John D):

… threatened to turn into a wider social and political emergency this week as general strikes and protests paralyzed Athens and Madrid, and Greek leaders lashed out at their German rescuers amid dark economic projections.

Protesters in Greece battled police using rocks and bottles last night at the end of the second day-long general strike. The walkout closed schools, hospitals and most forms of transportation, shutting down the economy as the government prepared to freeze pay, increase retail taxes and raise the
retirement age to 63 to reduce a huge deficit and attempt to pay off €53-billion ($75-billion) in public debt owed this year.

As European leaders scrambled to find a way to prevent the continent’s troubled southern nations from defaulting and jeopardizing the euro, citizens and some political leaders in those countries fought back, badly fracturing Europe’s cohesion. Greece’s general strike, the second in two weeks, followed a shutdown in debt-crippled Spain on Tuesday, with a countrywide general strike scheduled in Portugal next week….

In a shocking gesture that seemed to transform Europe’s bailout tensions into an outright political crisis, Greece’s deputy prime minister Theodoros Pangalos on Wednesday lashed out at Germany, the only country able to provide the money to rescue the balance sheets of Athens…

Some European officials seemed to lose patience with Greece. Otmar Issing, a former European Central Bank executive, warned the German parliament against using the country’s funds to bail out the Greek economy.

“The crisis is made in Greece,” he told the Bundestag. “It is the result of bad policy, not outside forces like an earthquake.”…

While protesters and union officials demanded that Greece hold back on austerity measures and spend more on stimulus instead, European officials said that Greece is likely to have deeper austerity measures, including an increase in the value-added tax beyond its current 19-per-cent level.

Greece has until March 16 to deliver its austerity measures, or more may be imposed by Brussels…

Greece will need to cut spending – by 10 per cent of GDP over 10 years – while raising revenue and cracking down on its untaxed black-market economy, which counts for as much as a third of all financial activity in the country. This combination could provoke further unrest, and may foretell
similar tensions in Italy and Portugal.

If Greece’s crisis and accompanying political unrest were an isolated case, it might be more manageable, but this week the turmoil seemed to spread across the belly of Europe.

On Tuesday, Spain’s cities were shut down by unionized workers protesting its left-wing government’s plan to raise the retirement age to 67 and cut spending in order to deal with its own serious fiscal situation….

And on Wednesday, Portuguese unions announced that they would hold a general
strike on March 4 to protest similar austerity measures.

Yves here. Other reports claim the majority of the Greek population supports the austerity programs, but that may prove cold cheer if opposition continues to be able to conduct effective general strikes.

Update: Two readers from Spain disagreed with the Globe and Mail’s characterization of the protests, saying they not large scale by Spanish standards and did not “shut down cities.” Back to the original post

These protests may seem barmy to some observers. Did riots in Thailand and Indonesia during the Asian crisis cut any ice with the IMF? Well actually, yes, the initial plan was not only too severe, pushing subject countries into a deflationary spiral, but they used the same template that was devised for Latin American countries, and many elements were inappropriate to Indonesia, Thailand, and South Korea.

Moreover, the assumptions about industrialization, progress, and class differ between the US and Europe. Americans do not identify with the image that many Europeans have of the industrial era: of people who lived in small towns suffering downward mobility in the first half of the 1800s, as home craft workers (particularly in the English countryside) and guilds were displaced by automated manufacture. In addition, in some areas, conditions were made more acute as commons, which were typically shared pastureland, were privatized. The loss of grazing land often pushed self-supporting households into poverty. That in turn led to an influx into the cities. A series of uncoordinated revolutions in 1848 swept the continent, and while only one overthrew the government (in France), those uprisings are now credited with producing significant political shifts in other countries.

By contrast, the popular history of the US in the 1800s is dominated by geographic expansion, conquest and settlement of the heartland, with the role of urban immigrants (who often worked in sweatshops), Chinese labor (critical to building the railroads) and newly freed slaves in taking up many of the most difficult jobs of the US industrial revolution often gets short shrift. Laura Ingalls Wilder is more widely read today than The Jungle.

That is a long winded way of saying those who view the protests as a futile protest against the inevitable may be looking at the wrong metrics for success. While they seem unlikely to achieve their narrow objectives of forestalling budget tightening, they may succeed in making sure that the burden of compliance does not fall unduly on the working man.

And needless to say, the political drama is at a minimum going to make it much harder to craft an economic deal. IMF mandated reforms helped make the world safe for America’s finest investment bankers and multinationals; Germany and the other EU creditors in theory have little upside (although the exposures of their banks to Club Med members does put them at considerable risk, readers tell me that saving financiers is ever bit as unpopular as rescuing Greek wastrels). And the rising tempers on both sides are certainly not helping.

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103 comments

this cannot go on. Your headline: “Violent protests grow in Greece, Portugal and Spain”. I don’t know about Greece and Portugal (though I am pretty sure no violence was involved), but let’s look at Spain: some hundred people protested in central Madrid in a non-violent way. There wasn’t even a strike, just a peaceful, short demonstration.

What does your article say: “On Tuesday, Spain’s cities were shut down…”. Wow, that’s the power some hundred peaceful protesters in a single city have!

Globe and Mail is a respected Canadian newspaper, and other legitimate media outlets put the number of protestors far higher than your “some hundred” assertion suggests, and a further search also shows there were protests in Barcelona and Valencia, not just a “single city”, Madrid, as you claim.

Business Week, Feb 23:

Tens of thousands of Spaniards protested on Tuesday (23 February) evening across the country in anger at the government’s plans to raise the retirement age.

Some 70,000 took part in the demonstration in Madrid and 50,000 in Barcelona, according to organisers. Police estimated the crowd to be much less.

The protests are the first of a wave of rolling demonstrations planned for other towns and cities lasting until 6 March

Yves, I live and work in Madrid,and let me tell you those protests you refer to, only summoned several thousand people (in a 4 million city), and were very peaceful. Nothing was “shut down”. Next time please, just call someone here to contrast your secondary informations. People in Spain are worried, but more for what they read on international papers than on reality. Yes, things are difficult, but we will solve them.

Globe and Mail may be a respected Canadian newspaper, but I am a respected Madrid citizen, and I can tell you a couple of things:

– Ridiculously exaggerated protester numbers have a long tradition in Spain. It’s not uncommon for organisers to say millions came to the protest, when only 50,000 were counted by scientific methods. So when organisers say it’s been 60,000, the real number was some hundreds. Just take a look at the protest’s photos and you’ll see this.

– The only significant protest was the one in Madrid, which lasted for 1 hour and a half and involved only some hundred. How can this lead to the conclusion that “violent protests are growing in Spain”, “Madrid was paralyzed” or “Spain’s cities were shut down”? We’re not talking even about a strike, just a short protest.

Madrid has dozens of these protests every month, sometimes for “failed” causes such as a Palestinian state or a Spanish Republic, but you wouldn’t conclude that Spaniards are preparing a violent revolution against Israel and the King, would you?

– You article should have been: “No increase in labour strikes in Spain despite huge recession and cuts in social spending and entitlements”, since that’s what stats are telling you at the moment.

I looked at a number of press reports. Even among those that were clear they were skeptical of the union’s claims, the smallest was reported by the BBC, a police estimate of 9,000. I do not know about Spain, but in the US, the police have a proud tradition of underestimating turnout. So I would say a minimum turnout of 10,000 (on a day apparently inclement weather) sounds reasonable for Madrid, which as I said from the outset is two orders of magnitude more than what you claimed.

Even Reuters, which argues the protests were small, pegs them at well over 10,000:

A total of only a few tens of thousands of protesters showed up for marches in Madrid, Barcelona and Valencia on a chilly Tuesday evening, according to most estimates.

let me put you an example. Four months ago, there was a huge anti-abortion protest in Madrid. Organisers put the number at over 2 million. Some independent sources, using individual counting methods (based on aerial and street-view photos), put the number at 50,000 people. Police sources said 250,000 people.

Anyway, even if 10,000 or 15,000 people protested in Madrid on Tuesday, it’s a very low number by Spanish standards. The real news is there’s no increased labour conflictivity despite cuts in entitlement, mass unemployment, etc.

I recall that when I went to the “Showdown in Chicago” that the media coverage overstated the actual number of protesters by a fairly large margin, but their claims looked fairly credible as I watched the coverage hours later on tv because the cameras deceptively made participation look far greater than what it actually

Which Showdown day were you there? The first night there were an ~ 700 when 1000 was forecasted. The final day garnered a crowd of 7-8,000 when 10,000 was forecasted. The numbers were high and unless one takes a view from 20 stories up, it is difficult to get an image of the crowd size. Turnouts are like weather forecasts, one can never be certain until the day of.

Considering many of the people traveled there to participate, it was a good turnout.

What kind of redress the EU has in place when its members break its own laws? Nothing, no plans, you just have legal experts studying whether a bail out is possible according to laws that EU members have already broken. I am afraid that markets and speculators will not wait for longer.

Paulo
Portugal is suffering from the spanish flu
As this old portuguese saying, da Espanha ne bom vento ne bom casamento
Portugal, as Spain, is under the boot of Madrid oligarchs; May be the solution would be an Iberian Federation, undressing Madrid oligopolies of all their powers
old and failed idea of king Philip the second, most of catalans, would accept a capital in Lisbon…..
Bom dia & keep smiling
Joseph
Barcelona

But that kind of news are rubbish. I am portuguese and we dont have violent protests. Even we dont have protests. Its all rubbish and the news are very strange.

What is main concern now in Portugal is… Weather. What has been violent is the weather. Last saturday, abou 70 people died in Madeira Islands because the badweather and the strong rain. We are seeing another storm towards to Madeira Islands and the main portuguese territory.

In fact we are very serious concerned with fiscal deficits. All, governement and oposition, are very concerned with financial problems and trying to fix our problems. We, portuguese living abroad, are concerned too. And we still canalize funds to Portugal to support the financial system and improve the capital inabalances.

We know that were living with a fiscal deficit and we must to fix that deficit in close future. Our problems started when we joined the €uro and since then our economy is in trouble. Our GDP growth stalled, the unemployment rose and were trying to change our productive sectors. Like textiles, automative, etc. Were trying to fixe that problems since 2000. In 10 years a lot was made but it wasnt enouph to change our economy and finances. Sadly the current global crisis dont help us too.

Some people in Portugal dont acept the cure to our problems, like unions. Especially public workers unions. But all we are trying to fix that problem: lack of economic competitiveness, fiscal deficits and capital deficits. We have different views to fix the problems, like monetarists or keynesians, but all we know that we must try harder and better.

So I think that kind of knews are spin acts from some investors who are betting against sovereign debt. Not really news in fact.

I’m spaniard and live in Barcelona. My perception is that this piece of news is greatly exaggerated also.

Although nobody can deny that “tens of thousands of Spaniards protested” I also think is a great exaggeration to say that “general strikes and protests paralyzed Madrid” or that “Spain’s cities were shut down”. I’m also convinced that this is the general citizen’s perception (appart from unions).

“The crisis is made in Greece,” he told the Bundestag. “It is the result of bad policy, not outside forces like an earthquake.”…

LOL. I thought the way they were planning to evade their scam anti-bailout “regulations” was to call this a natural disaster.

On Tuesday, Spain’s cities were shut down by unionized workers protesting its left-wing government’s plan to raise the retirement age to 67 and cut spending in order to deal with its own serious fiscal situation….

More MSM lies. By definition a “left-wing” government wouldn’t do that until after restituting the gains of the bubble, all the corporate “profits” which are now proven to have been fraudulent, and the personal looting which this accounting fraud enabled.

(It’s just like how the neoliberal Obama and his feudal health racket bill are said to be too “left”. I hate the vile MSM.)

I love to see these protests and I only hope the people stand firm against their intended liquidation. The bounty of the scam bubble and globalization has largely been monopolized by a handful of gangsters, while even the fattest public workers got a relative pittance.

So let’s first restitute the concentrated racketeering wealth, and then if it’s still necessary we can look at other, far lesser things.

When somebody says we have to cut costs, yet wants the children to eat less while he holds onto his classic car collection and keeps jetting off to Hawaii, you know he’s simply a criminal. The people know that’s exactly what these banksters, officials, and pundits are.

Yves
not in Spain; Unions tried to do an act of force, which failed miserably; spanish workers already know Unions are part of the Cast
there was not any violence, just a few demonstrations and marches
keep well

Mentioning 1848 makes good sense as it shows that the level of social justice that exists in Europe today was not only achieved by asking nicely.

I would assume that there will be street protests during pretty much of this year throughout Europe. Some of them will be of the calm well rehearsed kind with semi-pro protesters sent in comfortable busses paid for by wealthy unions to a spot where the “spontaneous” movement sociaux have been scheduled. Those kind of protests are part of the complex European political machine.

As taxes are increased and entitlements reduced, there will also be plenty of real spontaneous protests which strongly and easily motivated students/anarchists/hooligans will join (I do not mean to denigrate protesters, but looters have a tendency to view demonstrations as business opportunities).

If these two, broad, categories coalesce, as they did in France in 1995, they could have a real impact on national and European politics. I assume that the pan-European trade unions also will be organising cross-Europe demonstrations. These bottom-up movements could co-drive politics going forward. Politicians know this, of course, and act accordingly. Yesterday Total agreed to not close any refineries in France in the coming five years after the unions threatened to block Total facilities. No doubt was the Government twisting the arm of Total to make such an onerous commitment. Hence my comment yesterday that EU governments cannot be seen – and perception trumps substance here – as supporting the zombies as the expense of belt-tightening ordinary citizens. Bottom-up movements do have an impact here.

In addition, banks need to raise a trillion this year just to stay afloat, barring other bad news which could raise the need for capital further, etc.

Krugman, ( http://krugman.blogs.nytimes.com/2010/02/24/martin-wolf-makes-me-look-like-pollyanna/ ) for all his intelligence, seems to have been believing that a mega-stimulus (in addition to betting the economy through the FED in order to uphold a certain idea of normality) would do the trick and that other big structural flaws could be dealt with later. It may be that he – by reading Wolf’s comment it seems – finally begins to be realise that the problem is that the economy is levered like Lehman (or almost).

There is no silver bullet to create demand where it is needed (or not, really). Supply will have to come down while governments steer an increasing part of the economy towards “desired” outcomes (with all the accompanying risks of crony capitalism, etc.). Very best case scenario (I am wearing my European hat here) is an economy and society redirected towards ecological and economic sustainability over time.

The Spanish readers also objected to the characterization of the protests as “violent,” for which no source was even provided.

Clicking through to the source articles, I see that the estimates of the number of protesters were generally given by the organizers, with this telling phrase: “the authorities in the Spanish capital refused to give an estimate [of the number of protesters].”

Quoting a union official and then laundering the quote through Reuters such that “Reuters said there were 50,000 protesters” doesn’t work.

From a stylistic point there are two paragraphs in the middle of the post – about “Little House on the Prairie” and the 1848 revolutions – which seem to be floating, unattached to anything other than perhaps some vague concept that since Europeans protested a lot in 1848 they protest a lot today. I’m not sure what investment implications that might have.

A cynic (no doubt of North American origin) would perhaps argue that the European love of protests has a much more prosaic origin. There are a lot of people in Western Europe who don’t have a lot of pressing obligations between the hours of 9 AM and 5 PM and they’re willing to come out on the streets for just about anything, e.g. 400,000 people in London protesting fox hunting.

A European cynic would agree with you and point to the fact that, by Spanish law, some tens of thousands workers are literally “freed from work” in order to defend workers’ rights via protests.

They’re called “the freed ones” (los liberados) and, while only a tiny percentage of total working population, those Spanish protests on Tuesday would have been much larger if all these professional protesters freed from work, and no one but them, had joined the protests.

1. I removed “violent” “from the headline as soon as Diego weighed in, which was well before the time of your comment. I added a clarifying remark to the Globe and Mail excerpt as well.

2. Nowhere did I “launder” a quote through Reuters; in fact, I excerpted a quote from Reuters and the quote itself made it clear that they developed their estimate from several sources.

3. The logic of the 1848 reference is clear, you simply don’t like it. I start with the protests to the IMF austerity regime in the Asian crisis, I then point out that the US has a cultural bias to view protests as ineffective (our house polymath, Richard Kline, could wax far more eloquent than I could) in part because of very different views of the history of economic progress in the Europe v. here, and that also relates to perceptions of the efficacy of protests.

4. Your fox hunting protest example is way off base. It was held on a Sunday, so you 9-5 reference, implying that anyone who protests is unemployed or a student, does not apply to the example you tout. And people were bussed in for it from all over the UK for it, BTW.

By the way, Yves, I appreciate you considered our comments and amended your post.

I may sometimes be quite passionate and straightforward when I read unfair, unbalanced posts. But my only intention is for you to perceive how exaggerated and extremely unbalanced English-speaking news sources may be when dealing with perceivedly “lesser” economies.

I will add, as an Italian and thus with a deep knowledge (sigh) of street demonstrations and strikes, that what is really wrong about the anglosaxons’ MSM and academical world understanding of these ‘riots’ is the malthusian-like assumption that a strike and a demonstration obviously mean that a revolution is going to take place. No way. When we Europeans protested in 1800 you Americans were used to solve your discussions with a gun fight, and i’m feeling that this is still going on.
We are simply more prone to act using the tools of democracy, when we feel that our interests are in danger. Don’t you see the social similarities between the Tea Parties “movement” and these demonstrations? I think they’re quite clear. Democracy, bottom-up.

I stand by my comment that many Europeans, regardless of employment status, are willing to come out on to the street for just about anything. Hat tip to Diego for his reading comprehension and supporting evidence.

“e.g” stands for “exempli gratia,” “for the sake of example.” it is unimaginable to me that I would waste a Sunday to protest the hunting of vermin. Attribute my culturally determined disinterest to the overthrow of the July Monarchy if you wish.

As for the change in the headline, point taken, I will click the “refresh” button more frequently in the future.

If you dont mind I will give you my personal view about the portuguese problem.

In 1993 we acept to join the €uro and we signed the Maastricht Treaty. In that time it was a way to insure that we will never go back in the political system. Until 1974 we had a dicatorship. So, we knew that joining to EEC (former UE) , in 1986, and later to €uro, in 1999, we never will have again a dictorship. It wanst economic factors who made us to join European Union, but political factors.

Our economy wasnt in shape to have a strong currency, to compete in global markets, but we had the choice: democratic political system in Europe or risks of a new dictorship. We choose to join Europe and the Union.

After 1993, the former portuguese currency was in the SME. The level of interest rates fell a lot, between 1993 and 2000, and we had a small bubble in the real estate sector. And we incresead the global debt of portuguese economy. All, private, corporate and the State. Meanwhile the State sold a lot of companys to open the economy. Utilities, media, and a others sectors were privatized. But it wasnt enouph.

Our economy in nineties had to be open to global competion, because the OMC agreements. But our productive sectors were mainly in low economic value added, like textiles, for example. Who had to fight the imports from China, Brasil, Turky, etc. So, the new private companys, like utilities, started to invest a lot inside the cowntry and abroad. Like EDP, for example, who has been investing in Brasil, Spain, USA, and so on. That investment was made with debt. High levels of debt.

Today we have a high level of debt but we are starting to capitalize the profits from these investments. We have a strong financial system after we cut the losses in two small banks. We have banks who make half of profits abroad, like Banco Português de Investimento (BPI.lis), with strong position in Angola, where economic growth is strong because the oil. We have Banco Espirito Santo (BES.lis) who has a strong position in Africa, Brasil or even USA.

We have a strong utility company, like Energias de Portugal (EDP.lis) who have a subsidiary Energias de Portugal Renováveis (EDPR.lis) who is a global player in renovable energy, with investments in USA, Europe and, of course, in Portugal.

We have Portugal Telecom (PTC.lis) who has half of the profits in Brasil, with a subsidiary who is the second big player in brasilian mobile phone sector.

We have CIMPOR (CPR:lis), who is a stroing global competitor in cement production. With plants in Africa, China, Portugal, Brasil. That company was raided by brasilinas competitors with an hostil take over, last weeks.

We have GALP (galp.lis) who has 3 biliões of crude reserves and production in Brasil and Angola. Is one of the partners of Petrobras, the main company in the oil sector in Brasil.

We have Jerónimo Martins, (JMT.lis) an retailer, with a strong position en Portugal and Poland.

We have SONAE (SON.lis; SONI.lis, SNC.lis), one conglomerate with strong positions in retail, media, wood industrial.

We have Portucel Industrial (PTI.lis) the best paper and pulp company of the world. His financial profits are the best in Europe and one of the world.

We have more good companys, listed in Euronext/NYSE lisbon. They are good companys with a high level of debt but starting profiting with investments made in the last 15 years.

And we have the old sectors who are changing their profile and starting compete in global markets with high level of economic value added, like the shoe companys or textiles companys.

But that changes didnt change all the cowntry. We still have a lot to improve, especially in public sectors, the healt system, and so on. After the portuguese revolution, in 1974, we had a communist governemnet who put almost all economy in public hands. In 1976 we were like CUBA. Only small companys werent nationalize by that communist governement. That communist was shut down after the first free and secret elections. Thats why in nineties we start to privatize the economy.

But we still maintain a strong public economy, like hospitals, schools, fly company, etc. But we need good economic conditions to improve and privatized some sectors. The portuguese dont wnat to sell cheap companys. We know that foreigners want some companys and is better o us selling in good shpae and with good prices.

So, today we have an economy with a lot problems. Old problems and new problems. Large sectors with low level of value addedd who are having problems to be competitive and survive. And we have an high level of debt by familes who had to buy new homes because the real estate sector was old and with old infraestrutures, made during the thirties. And now we have fiscal deficits because the economy isnt strong enouph to absorve public lay offs and pay taxes to equilibrate the State balance sheet.

But we know that were starting to improve. Our big companys are now in good shpae, are investing much more abroad. Another new companies are starting to growth more than old companys are dying. We already have high technological companies like Altitude Software or Bial Pharmaceuticals. We are changing our economy but that global crisis came and put more pressure on us. All of us: managers, families, workers, stockholders, etc.

We now we must to cut our highe level of debts and improve more the portuguese economic value addedd. we must improve our returns and profits. We must to cut our high level of the State and improve the fiscal position. So, isnt true that were struggling against the cuts in the public sectors and private economy. Thats why we have a high level of unemployment. We are living a hard reestruturing policy in the economy. To put our companies in better shape and starting to crate jobs when global economy improves.

We got different views how to figth the portuguese crisis and global crisis. But almost every economist or political view has the same credo: how to improve and put our economy in good shape and start create more jobs than we liquidate. This crisis inst good for us and we now that we must pay more for the high debt but we know that in the future, we will have a better economy, better levels of debt and good balance sheets with strong profits.

Paulo Monteiro

Disclaimer: I have personal interests in the companies above mentioned. I have circa 80% of my personal investments in some companies and maybe mine views are biased. I dont pretend to give you any kind of financial advice. Please, if you are interested investing in those companies consult your financial adviser before any investment. Thanks.

Dear Yves,
(I am Portuguese, live in the UK and am an avid reader of financial news and blogs)

I think most Anglo media is captured (in a cognitive way) by the blatantly racist PIGS myth propagated by some highly conservative and nationalistic UK press (you know about who I am talking, I guess).

PIGS bear in fact little similarity among each other. One example, regarding social structuring Portugal is more similar to… UK and US: high inequality (PT, UK, US are the worse OECD countries), slightly lower taxation (in the 45% of GDP or such) and, in the past, lower unemployment rates (Portugal a few years ago was around 5%, now 10% and Spain 15% to 20%). I would love to have the inequality GINI of Spain (though I would not like their unemployment rate), but unfortunately we have an American GINI. If you don’t believe me, than see e.g. http://www.guardian.co.uk/news/datablog/2009/mar/13/inequality

The same can be said about the labour culture: Unions are much weaker in Portugal than in, say, Greece or France. I would love to have stronger Unions in my country, being a pesky European socialist.

The same can be said about state debt loads: Spain is healthier (50/60 % ?) than Portugal or Greece (much worse). In this issue, I find that especially Spain is being unfairly clustered with the others.

The same can be said about how holds the debt: In Italy it is mainly held by locals, in Portugal mainly by foreigners (Zero Hedge had a nice piece on this).

The same can be said about national issues: Greece and Portugal are mainly homogeneous, Italy and especially Spain are more diverse (just look at the tone of one of the comments above by someone from Barcelona – Catalonia, about Madrid – Castella).

There are, of course, similarities (good weather, and most importantly all running trade deficits).

The name PIGS is what it sounds: a racist slur. And its only power and real existence is because the market is driven by sentiment and psychology. Sentiment then becomes reality, but the factual numbers and social constructions do not support the PIGS cluster.

Personally, I’m captured by the photos in the tourist brochures, so I call these countries:

STUDS – “Sunny, Tranquil Utopias with Delerious Sunshine”

PIGS is way too Lutheran for my sensibilities. And there is the undertone of barbeque, which only makes me think of James Frazer’s The Golden Bough and recoil in horror.

I just hope things don’t descend into a Goya-like tableaux of revolutionary carnage, but I think the overall structure of consciousness is too atomized at this point for that — Church, King, tribe and class all are dissolving == so the organizing signal is full of static. I suspect it will become every man for himself, rather than any kind of organized apocolypse, more or less a bewildered anarchy, like Lagos, Nigeria or the sub-Sahara — if things really go downhill.

PIGS or STUDS? I have an alternative name in between. Let’s call them Mediterranean or Southern European countries, and a small-print explanation at the end for those not identifying them with STUDS countries:

Protests: By whom and to achieve what? Those to me are the principle questions. It would appear that the protests were primarily organized by unions and in particular by public employee unions. That is understandable because theirs are the jobs most likely to be lost, but if they are protesting in isolation—and it would appear to be so—their cause is already lost. Without broader support in their countries, they can make a lot of sound and fury, but the flutter of a redundancy slip will have the final word. I take that as the undercurrent of some of the well-intentioned pushback in comments in this thread. Part of me wants to be sympathetic to part of the problem, but the fact is the context has changed, and strategy needs to change.

Greece’s problems aren’t a result of the financial crisis. Greece has run unsustainable deficits for decades, finally turning to accounting chicanery. Greece has had do-little public sector jobs as buy-offs for social peace, too many jobs, and these wealth-transfer posts can’t be funded, now. The political counterweight for those jobs was a tax system which more or less allowed there significant domestic wealthy elite to live in a domestic tax haven, paying virtually nothing. All of this was possible while phoney ‘growth’ was happening due to the credit bubble making Greece’s sovereign debt fundable on capital markets without qualm—once it was euro-denominated. (Greece had financial crises in the recent past before the currency union.) Greece’s problems have been, in fact, made in Greed. —So it would be a good thing if those who live in Greece got on the stick and came up with some solutions. The solutions at present appear to be, ‘Shaft the common man, and bill him for the surgery.’ That proposed VAT is brutal . . . but then that’s one of the few taxes which is relibably collected there. And the rise in the retirement age hits the poorest with particular force. What is not on the table are effective tax enforcement upon the wealthy, and at higher rates. This, too me, is what protestors should be protesting, not the evaporation of do-little jobs which the country can only afford if someone else is picking up the tab. Then too, another goal of a demonstration which would be reasonable would be to demand a ‘renegotiation’ of existing debt over longer terms at lower rates; ‘reasonable’ because the banks who snapped up Greek sovereign debt in the good times did it in full knowledge of the situation but were quite willing to leap in as ‘enablers’ as long as they got their money rent on it. French, Swiss, and German officials would find if hard to defend against a demand for renegotiation in a situation where they are insisting that the Greek citizenry work two, four, seven years more of their lives to pay that debt off. To me, the point is as you say, Yves, to keep the impacts of necessary changes from being excessively and unfairly taken out of the hides of the poorest.

Portugal’s problems are also not caused by the financial crisis. PJM above sums them up well. Portugal joined the euro, and this was both necessary and good as it brought cross-border investment from within Europe, gave increased access to markets there, and (in normal times) gave increased access to capital markets there. But the export sector, and overall productive sector there is too small yet to support services and government at a ‘European’ level, all efforts to expand them notwithstanding. Just as PJM says, remittances from abroad are still a very important part of the local financial system, a real indication of production imbalances. What has happened is not that Portugal has ‘overspent’ or ‘overborrowed’ but that the borrowing they have done was only possible at the excessivly low rates of the credit bubble: Portugal can’t afford a rate spike, and so services are squeezed with funding becoming dear. The alternative to that are long-term development funds from within the EU, but that was controversial (as a matter of competitive advantage) even before now, and will be very difficult if not impossible to get funded in present conditions. Portugal’s economy is small and weak relative to stresses around it, and is getting bruised. That is not their ‘fault,’ even if it is their pain.

And so on, and so on. The points to me are: a) the immediate crises are by-products of lending squeezes, and b) stink of predatory instigation by third-parties speculating against the weak countries involved. If the poor in the affected countries aren’t to take the hit for everyone, they need to get out in front with solutions rather than just saying no. I think most in those countries know this better than I do.

So Swedish Lex, Krugman has been living in an academic dreamworld of his own devising. I know he’s smarter than that, but the problem is that he seems to have restricted himself to a textbook approach rather than a political economic approach. His blog post which you link to really sums up with amazing, if I think unintended, succintness his intellecutal dead end. He wants massively increased spending in the US together with ‘decreased exports’ from those dastardly Germans and Chinese. All of these are political impossibilities. It’s a lovely equation which only computes in a world other than the one we live in. Even supposing that he got his domestic spending, and it’s not happening in the present election cycle, it would just seep overseas. Unless those Germans quit selling us those machine tools and automobiles we are so eager to by, damn them. Or unless China ‘raised its peg’—in which case the bottom end consumer non-durables that would theoretically become more expensive from there would simply go back to Mexico and Malaysia or sideways to Bangalesh or Vietnam, which places would then get the boost from our spending. Along with our domestic malefactors of great wealth who have a fantastic racket going whereby the government gives them money which they then lend back to the government at higher rates, the hell with the real economy. Krugman doesn’t really get any of that into his formula for success. But Martin Wolf does. Joe Stiglitz does. Willem Buiter does. Simon Johnson does. Ken Rogoff does. So those are the folks I look to, and other like them. Krugman can join them whenever he wants, since he at this point doesn’t disagree with them.

So Yves, I thought your references to the economic impacts of the early nineteenth century were both sound and cogent. Maybe we read the same people, hey? And my card says, as you know, ‘Talespinner, polyhistor, and envisioneer.’ I’ll take up that ‘polymath’ tie tack and wear it when I get some of my &$*%^$&$*$* work done and published.

Richard says — “Greece’s problems aren’t a result of the financial crisis.” …

… and a bit further … “All of this was possible while phoney ‘growth’ was happening due to the credit bubble making Greece’s sovereign debt fundable on capital markets without qualm—once it was euro-denominated. (Greece had financial crises in the recent past before the currency union.) Greece’s problems have been, in fact, made in Greed.”

Isn’t the financial crisis a longer term event with the well orchestrated flooding of the globe with cheap credit so as to entice the ‘greedy’ (less prudent suckers) into phony ‘growth’ more of a trigger to that well planned longer term event? And didn’t that phony ‘growth’ — caused by those intentionally dropped debt trap bubble bombs — create the conditions that allowed unions and some public workers to get their salaries elevated above the private sector workers so as to set the stage for future divisiveness that was essentially union busting? And, get local taxes bumped higher? And, at the same time, did those debt trap bubble bombs not attract a lot of immigrant laborers to the respective areas they were dropped in, to further create divisiveness and anxiety in ‘job’ markets? And did they not also foster an increase of the number of the, ‘free market’ ‘entrepreneur’ class of worker, (shades of JIT manufacturing) to pit further against and break the union worker/labor?

Yes, past problems, regardless of where (country, county, state, province, etc.) and how severe, served to exacerbate the debt trap phase of the financial crisis, but Greece’s problems ARE a direct result of the global financial crisis.

You say the same about Portugal;

“Portugal’s problems are also not caused by the financial crisis.”

Huh? Review the formula, I am sure I left a few nuances out.

PJM says; “So, we knew that joining to EEC (former UE) , in 1986, and later to €uro, in 1999, we never will have again a dictorship.”

Dictatorships come dressed in many suits. It is possible to have a financial dictatorship that is interested more in control than profit and that deceptively works to pit the prudent against the not so prudent?

It is a shame such waste of a generation when all they need to do is reduce hours of work. The public employee will only be the first target. The IMF has already set the goal of forcing women and children into the workforce and introducing greater labor “flexibility.”

Whatever solutions are imposed on the working folk will be of limited value, as China will continue to construct more capacity in its industrial parks for off-shoring American corporations.

I saw an interesting atricle (forgatten where) suggesting that Greece could easily meet expediture targets by reducing its expenditure on the military (the article suggested 3% gov exp). Most of this is driven by a politcally trumped up fear of Turkey (esp Cyprus).
Hmmm maybe there are other parallels … USA/Iraqistan?

Another person suggests neither military expenditures nor bond repayments do for Greece what needs to be done at the moment: Help them improve productivity to boost growth rates. Both are a drag on economic performance.

Yves, I admire your blog and your job, but the information you gave about ‘Portugal protests’ is not correct. In fact there are no protests (at the moment, at least) and there is not “a countrywide general strike scheduled in Portugal next week” as you say. A general strike is not a subject. Completely not.
There’s eventually a confusion with another country.
regards,

You marginalize and dilute legitimate racial issues. You know, racial issues like the ongoing problems in Spain and Italy at the treatment of black soccer players…whereby fans in the stands regularly make monkey noises and throw bananas at these players when they are introduced. [All a BIG, GIANT ANGLO media exaggeration, I am sure…as was the apology by the Spanish Football Association for the obscene treatment of black footballers.]

PIGS is an apt acronym used to describe irresponsible countries engorging themselves at the trough of debt. So…let’s put it to rest and be fair and inclusive by broadening our scope of swine. Let’s get the two biggest offenders in there—the UK and US—and say:

U-PIGS-U.

And please stop the inane racist claims.

If you are so concerned about racial issues, though, please tell your countrymen to stop going to games adorned in NAZI flags, while shouting racial epithets and hurling peanuts at the darker skinned players. And, while you’re at… when Spain’s national coach calls an opposing black player (Thierry Henry) a “nigger”, please tell your sport’s governing body that a paltry 3,000 Euro fine (which is all the coach was fined) is an even greater obscenity.

[Yeah, the soccer issues are wholly irrelevant to the underlying post…as are the claims that the acronym “PIGS” is racist.]

So anti-Spanish racism is somehow justified by the fact that Spain, as any other country, sports its own breed of racists? Of course not.

[By the way, Spain’s national coach didn’t use the word “nigger”; he said “negro”, which translates as black man. Anglo press decided to translate it as “nigger” to add dramatism to a non-dramatic expression: “negro de mierda” = “fucking black man”, not “shitty nigger”].

I would like to sorry my bad english. I am working and writing here and is worst because I dont edite my first words.

I dont conplain about the word/acronym PIGS. I dont care about it. Everyone has his opinion and isnt my business to complain about other opinions.

I could say to Duncan: have you checked the figures from your cowntry? I have it. But I will save that opinion to myself and my investing.

What I say is: my personal investments are beeing reinforced during this crisis. I look to the low prices of some portuguese stocks and I buy. For me is a good opportunity. My private investments are with that companies and with portuguese economy. And isnt because I love my cowntry, is because I see value at good prices. My retirement is 80% in those companies and 20% in europeans bonds. I see that crisis as an opportunity to buy low what I sold high.

I live abroad Portugal (not in UK or USA) and I still invest in those companies. I dont believe we will fail. bBcause we made errors but we want to fixe them. I could invest in others cowntries or even in other continents. But I dont. I still invest in my cowntry and at thse prices, I will do in the close future.

I dont complain agaisnt the markets. Or against other opinions. They invest or trade as they wish as I do for living. I have opinions about the global problems and about others cowntries. But I dont say what I think about others because isnt my way of living. Everyone has his opinions and stick with them.

As a portuguese citizen I only show my personal opinion about the portuguese economy. What others think and invest is with them. As in world of trading, we will see who wins and who will looses. I stick with my personal investments and I put my money where my mouth is. No regrets, only plain way of living with and by the markets.

The US has a very vibrant tradition of strikes and protests. Vietnam , Flint Sit-Down, Civil Rights, WW 1 veterans, a national mining strike in Carter’s era. During the Bush era we had the anti-war protests as well as the much forgotten immigrant rights rallies, which really shut down L.A.
There would be a lot more action in the U.S. now, but Obama’s election pretty much diffused it.

But if you want a more sobering assessment of how this is perceived on this side of the pond go to the WSJ article yesterday and read the comments. Visceral anti-union, anti-government law and order types at the ready to crush any resistance… And these are presumably better educated Americans who can afford a subscription to the WSJ.

Granted, this tabloid isn’t what it used to be but neither is the Economist… Dumbing down has consequences as does dumbing up!

A petit-bourgeois “politics of envy” wrapped in an enigmatic cognitive dissonance that rails at banks domestically but misses their role in this debt crisis internationally, blaming the victim more than the culprits [Greek leadership and financial elites] responsible for the fiasco. The willingness to identify with the latter is chilling…

It will be interesting to see their response when it’s our turn to pay the piper, especially when many of these same folk will not escape the AUSTERITY measures implemented.

I completely agree. I recently read a paper by a Spanish Socialist think-tank, focused on sociology and stats.

It stated that while middle-class and high-class Spaniards were nervous and demanded “sacrifice” and entitlement cuts, low-class Spaniards (who are obviously the most affected by the crisis) were relatively calm and didn’t think sacrifice was necessary.

I immediately came up with a solution: let’s compensate every cut in social spending and entitlement (as necessary as they are) with a tax increase on higher classes.

At issue is the inequity and inequality inherent in the capitalist economic system in which the bottom of the pyramid always pays for a disporportionate share of the “costs” [externalities] – economic, social, and environmental. The answer of the higher classes is always more economic growth and sacrifice but somehow the gulf in inequality never really diminishes over time or, if it does, never remains in place without required adjustment on behalf of the lower classes to new economic realities. Of course, the latter are attributed to the all-knowing market in which the visible hand of the higher classes remains invisible.

Perhaps the transparency of such machinations is beoming more than obvious to those at the bottom of the pryamid. How it plays out will be especially instructive for US.

The bottom portion over the 20th century has actually received a lot–from education, to retirement, to medicine. Compare late 19th century living standards to late 20th century living standards, and then tell me that the bottom got nothing.

Your reference to “the top” is also somewhat misleading, because except for a very few families such as the Rockefellers, the members of the “top” keep changing.

I’d say you are right—for maybe half of the 20th Century, thanks to very hard-fought New Deal rebalancing. But the same engineered structural wobbles now have us veering off a cliff of inequality, exceeding even guilded age of robber barons.

Mickey said it well, as did someone else: it’s about the concentration of power. Those who crave it in their lust relish the immiseration of others for the control it yields.

And over the course of the past 30 years how have the bottom fared compared to top? It would seem you refer to much of the the 20th century but say very little about the latter part and the beginning of the 21st… Moreover, you act like the bottom was given these improvements out of the goodness and philanthropy of the top. Pardon me, but power is never given away but always taken. The working class fought for every one of the improvements you mention.

Nor did I say that there hadn’t been any improvements but that the disprortionate share of the costs are still borne by the bottom. And if we move outside of the OECD region the inequality is even more appalling.

But most galling is your assertion that the “top” is constantly changing so as to convey the impression that there’s equal opportunity and the meritocracy is vibrant. Golly gee, the koolaid you’re drinking sure tastes swell. Keep drinking…

“But the same engineered structural wobbles now have us veering off a cliff of inequality, exceeding even guilded age of robber barons.”

There is clearly inequality. I just don’t know how to solve this. Heck, I don’t even know if it should be solved. A lot of it, I think, is purely the result of a bull market,which increases paper wealth. When markets tumble, so does that paper wealth. A lot of it could just be that the economy required certain somewhat difficult to obtain skills, which made the people who have those skills more valuable. If I am, say, a trilingual engineer in a globalized world, those particular math and linguistic skills make it more difficult for IBM to replace me than a janitor. I really don’t know–I don’t have enough data to really analyze this.

As for: Mickey said it well, as did someone else: it’s about the concentration of power. Those who crave it in their lust relish the immiseration of others for the control it yields.

I don’t think a lot of it is power. I want wealth, but I have no interest in running a country (or even a small city). I just want the amenities that wealth provides. But again, even assuming Mickey and you are correct, there’s no real solution (at least none that I can think of)–you can replace the power-hungry people at the top with a different group of power-hungry people, but that won’t change the fortunes of the rest of the population.

The union demonization and the authoritarian fury against protests is really disturbing. This is Mussolini-style corporatism writ large.

I assume you’re talking about WSJ online comments… ///???

Well, this has been standard fare for those guys for a long time now… at least since Gigot started running OpEd page. I’ve been seeing this stuff on letters there for a looooong time now… come to regard it as standard fare. Your term:

Mussolin-style corporatism

… is, IMO, apt. And it’s what that paper’s Editors have been advocating for a long time now: “Personal Responsability” and “Character Matters” as mantras motivating a Clinton impeachment, but -0- accountability for WS crooks who took us to the brink.

…

WRT to those articles, I presume commenter was referring to C-1 stuff on GS gal who wrote those Greek swap (carry) deals, and entities created (TITLOS) to facilitate the whole thing. GS received some $300m for that last one: according to WSJ article, GS has done (from memory) around 12 of these since prior to Greek’s EU admission.

When you wrote a few days ago JPM was involved in this stuff (GS not the only one), well… seems all of ’em were doing it, all the big boys both here and abroad. Some w/ECB participation, & as law w/ECU blessing.

Disappointing their ministers involved in waving this stuff on are pretty much silent.

Lastly, one of those articles (C1) was:

Investors Bet Greece won’t Spill

… took 2 pages to say little more then that title. Yet, today’s NYT A-1 had article saying just the opposite, w/added emphasis that, currency traders are going after Greece (much like Iceland).

Which, since this Greek thing began, only adds to my wariness of any headlines I’ve seen on this side of pond: there is a schizophrenia in this reporting, with very little comprehensive detail on the many constituent parts such as Richard Kline touched on at 8:18am.

My suggestion on covering this: seek a little more from PIIGS citizens (for lack of better term and apologies to the locals) and let AEP propagate to readership via means other than NC.

These are all people who’ve been painstakingly indoctrinated to view Europe as a contaminating influence promoting state intervention, resistance to US wars, and appeasement of Muslim terror. I could see where WSJ readers might be extra sensitive to Europe’s influence when it models mass action against parasitic elites.

“And over the course of the past 30 years how have the bottom fared compared to top? It would seem you refer to much of the the 20th century but say very little about the latter part and the beginning of the 21st… ”

1. I would be amazed if a survey of a random sample of people were to say that their standard of living is lower now than it it was 30 years ago, unless you live in Nauru or Iraq or Zimbabwe. Are you honestly telling me that you are one such person?

2. The top haven’t actually seen much by way of improvements in actual living standards, I don’t think. Sure,they’ve got private jets now instead of first class commercial plane tickets, but most of the other improvements, such as cell phones and so on, are actually shared by the majority. True, their paper wealth has increased, but it doesn’t translate into actual living standards (I don’t think–again, I have no actual data on this).

“Moreover, you act like the bottom was given these improvements out of the goodness and philanthropy of the top. Pardon me, but power is never given away but always taken. The working class fought for every one of the improvements you mention.”

No, it didn’t. NOBODY fought for the improvements over the last 30 years–they borrowed for them. That’s the point–the credit cycle is turning, so the borrowers can no longer maintain the same level of consumption.

You then wrote, “Nor did I say that there hadn’t been any improvements but that the disprortionate share of the costs are still borne by the bottom. And if we move outside of the OECD region the inequality is even more appalling.

What costs?? The costs are actually born by the stupid lenders who don’t have a snowball’s chance in hell of ever getting paid back.

“But most galling is your assertion that the “top” is constantly changing so as to convey the impression that there’s equal opportunity and the meritocracy is vibrant. Golly gee, the koolaid you’re drinking sure tastes swell. Keep drinking…”

1. I said nothing about equal opportunity. There is enough opportunity to do well, though–even very well. Look at this year’s Forbes 500 list and compare to the wealthiest people in the 70 or 80s. You won’t find a huge overlap.

2. Is the koolaid comment an admission on your part that you have no facts (or even specific assertions) to argue the contrary? Or do you always get angry and resort to such nonsense when people disagree with you?

First of all, you began your discussion with how living standards had improved for the bottom between the 19th and 20th centuries. When I and Doug challenged your assertion regarding the past 30 years you replied that data did not exist or you didn’t have any. So you wouldn’t know then would you, asking me if my standard of living had increased? That would depend on what definition you employ. I want for nothing if you must know but not in the materialistic, consumption-oriented way you think. I QUIT America 30 years ago! Let me tell you, from where I’m sitting the past 30 years or so have not been kind to people in Northeast Ohio. So it isn’t a question of whether my standard of living has improved but rather has our standard of living improved because we’re in this all together right? Or is that just pablum trotted out by the “top” for bottom feeder consumption? They don’t really mean it.

As for statistics or facts, it is common knowledge and readily admitted that incomes have stagnated for well nigh 30 years in the lower three quintiles of aggregate income. [See US Statistical Abstract – Table 678] Even the business press laments this development – the WSJ, Business Week, and NYT – have all printed articles on this growing disparity in income. Warren Buffett has even suggested that something is wrong when his secretary pays more in taxes as a % of her income than he does. One would almost have to be comatose in a bubble not to be aware of the growing inequality in this country. Do you get out much? Google ‘income inequality’ and read all about it. Where have you been? Is your gated community walled off from the rest of the world? Any for sale signs in your neighborhood due to foreclosure?

Some individuals are very good playing ignorant when it suits their purposes, making specious arguments that are then are deflected with some off the cuff remark about how a “survey” of 30 people would probably find that their standard of living had improved over the past 30 years. You’re welcome to come to Ohio or Michigan and do your polling. Let’s start in Cleveland and Detroit.

Then you shift gear and suggest that gains made in the first half of this century were not the result of working people struggling by shifting to the last 30 years of credit/deficit spending which masked the declining earnings, etc. As long as the credit spigot was turned on, many lived liked their parents did and it was morning again in America. Do you want to discuss the first two-thirds of the 20th century or the last 30 years or so. It’s your confusion not mine.

Look around and ask yourself, is the average American better off today then he/she was 30 years ago? If not why not? Why is the concept of CLASS creeping into the discussion on this blog and elsewhere if it’s morning again in America? There I go again flashing back to when Ronald Reagan kicked off this koolaid drinking exercise that even Kevin Phillips, a conservative, has admitted went way off track.

As for the koolaid, I will not suffer a fool kindly who tries my patience with sophomoric arguments unsupported by data but then expects criticism of his comments to be refuted by data about which he/she readily admits that he/she has no data. You can’t even see the forest for the trees, mistaking name changes on a Fortune list for the institutional/structural forces that perpetuate the unequal distribution of wealth in this country. Most of the wealth in this country is inherited. If wealth turned over as much as you imply, then why are there legacy preferences at elite universites in this country? If you choose to apologize for the status quo so be it, but it should be obvious that I haven’t drank any koolaid for at least 40 years.

“First of all, you began your discussion with how living standards had improved for the bottom between the 19th and 20th centuries. When I and Doug challenged your assertion regarding the past 30 years you replied that data did not exist or you didn’t have any.”

1. I implied that I don’t have the data, for the record. I do not personally know of anybody who is worse off now in terms of living standards than their parents were at the same age (do you?). My friends are not necessarily representative. I believe the original comment was about Spain, though. How many Spaniards do you know were better off 30 years ago?

“Let me tell you, from where I’m sitting the past 30 years or so have not been kind to people in Northeast Ohio. So it isn’t a question of whether my standard of living has improved but rather has our standard of living improved because we’re in this all together right?”

I have never been to Ohio, so I have no idea (why would you assume I’m American, btW??) Again, though, I imagine most of those people live better than they used to, but if not, why did they stay in Ohio? Much of the country’s standards of living clearly improved. If they didn’t want to change, or couldn’t be bothered to develop new skills, that’s their fault, not mine.

“Or is that just pablum trotted out by the “top” for bottom feeder consumption? They don’t really mean it.”

I don’t understand this. Are you saying that Ohio as a whole really couldn’t afford to live within their means??

“As for statistics or facts, it is common knowledge and readily admitted that incomes have stagnated for well nigh 30 years in the lower three quintiles of aggregate income. [See US Statistical Abstract – Table 678] Even the business press laments this development – the WSJ, Business Week, and NYT – have all printed articles on this growing disparity in income.”

OK, so 40% of the population is part of some grand conspiracy to screw the other 60%? Are you sure there is no better explanation?

“Warren Buffett has even suggested that something is wrong when his secretary pays more in taxes as a % of her income than he does.”

Warren Buffett was commenting on the wacky tax laws, nothing more.

“One would almost have to be comatose in a bubble not to be aware of the growing inequality in this country. Do you get out much?”

I am not an American, and I have no desire to ever become one. That changes nothing re: the argument.

“Google ‘income inequality’ and read all about it. Where have you been? Is your gated community walled off from the rest of the world? Any for sale signs in your neighborhood due to foreclosure?”

Actually, no, there are no foreclosures in my MIDDLE CLASS neighborhood. Perhaps where I live, people live within their means? Or, perhaps more likely, reality hasn’t yet caught up. But you’re mixing up cause and effect, I think. People chose to buy absurdly high-priced homes with very little up front and had little by way of savings besides that. Going back to mathematics, they were leveraged to the hilt,and when you leverage to the hilt, you can expect bad things to happen (just ask Greece)

“You’re welcome to come to Ohio or Michigan and do your polling. Let’s start in Cleveland and Detroit.”

“Then you shift gear and suggest that gains made in the first half of this century were not the result of working people struggling by shifting to the last 30 years of credit/deficit spending which masked the declining earnings, etc.”

Well, my view is that it’s a little more complicated than that. Firstly, the first 50yrs weren’t all that great–you had two major depressions and two world wars. I was comparing from one century to another for convenience. Had I picked from WWII onwards, it would’ve proved my point even more.

“As long as the credit spigot was turned on, many lived liked their parents did and it was morning again in America.”

Yes. That’s the point. Governments used up their credit to basically placate a large, voting-age population via all sorts of services they could not ever hope to afford in the long wrong (their own economists and actuaries told them so! This isn’t some secret). Consumers CHOSE to do stupid things like buy internet stocks in ’99, max out credit cards, get Hummers, and buy homes with no money down. They also CHOSE to spend $40k a year on liberal arts degrees so that they could get hammered every night. Meanwhile, those who CHOSE to save to some degree got screwed because of 0% real interest rates.

“Look around and ask yourself, is the average American better off today then he/she was 30 years ago? If not why not? Why is the concept of CLASS creeping into the discussion on this blog and elsewhere if it’s morning again in America?”

I didn’t say that the US or Western Europe is going to be better off ten years from now (see i.on.the.ball’s comments about me being defeatist). I said that these countries have been living beyond their means, and things must revert back to the norm.

I am not a political conservative. I just think you are assigning blame to the wrong group of people (or, better put, exclusively assigning a lo of blame to a small group)

“As for the koolaid, I will not suffer a fool kindly who tries my patience with sophomoric arguments unsupported by data but then expects criticism of his comments to be refuted by data about which he/she readily admits that he/she has no data.”

Actually, a lot of the people you “agree with” on this thread do this far more than I ever could. You “suffer” them because they happen to share your views. Hence the echo chamber.

“You can’t even see the forest for the trees, mistaking name changes on a Fortune list for the institutional/structural forces that perpetuate the unequal distribution of wealth in this country.”

This is the most interesting part of your post. The point is that I don’t think anybody has a good grasp of these “structural forces”. Maybe technology has created a larger gap between skilled and unskilled labor. Maybe overly low interest rates over an overly extended period of time are responsible. Maybe a whole lot of this is on paper, and once the “rich” creditors try to actually get their money, they’ll realize the difference between paper wealth and actual wealth. Maybe wealth gets concentrated by those who appreciate it, and is lost to those who squander it on Hummers. I personally believe that it’s a combination of all these things, but I could be wrong, and maybe it has to do with something else.

“Most of the wealth in this country is inherited. If wealth turned over as much as you imply, then why are there legacy preferences at elite universites in this country?”

I don’t think membership to an elite university means much for the future. I doubt it will have any effect on most people’s wealth going forward.

“If you choose to apologize for the status quo so be it,”

Who said I’m apologizing for the status quo? I am saying that protesting in the PIGS countries isn’t going to help them one iota. Calling the German lenders Nazis isn’t going to help, either.

It would seem that the target keeps moving… so I’ll never be able to lock on. No matter!

But we actually agree that one thing is for certain: AUSTERITY will eventually make its way to this country irrespective of what modern monetary theorists might have US believe… The bill does come due. To pretend otherwise is myopic. Do we agree on this? The time frame? 5-10 years down the road? Perhaps you would care to weigh in on this. And I would appreciate your comments. How long do we have before the bill comes due?

It’s likely that the “bottom” will bear the brunt of such AUSTERITY. I’m assuming that we agree on this as well. Nor do I believe that default or debt repudiation is in the cards or that doing so will mitigate the effects of AUSTERITY. It may actually make things worse! The republic will be tested and constitutional government may hang in the balance. Ever read Naomi Klein’s DISASTER CAPITALISM?

Now as to the causes and roles played by the various parties to this dance I suspect we may disagree. But it will not change the outcome: AUSTERITY. If you’re with me up to this point, then I wish you would have said so a while back. Perhaps you alluded to it and I missed it. I am very tired and my patience is thin as traversing the same old ground wears on me…

In any case, I make a sincere effort to respond to those who might disagree with me in the belief that we might both learn from each other. Positive reinforcement isn’t why I’m here. But humor me, what is your nationality? I’m interested only insofar as how the US debt crisis is perceived elsewhere by another human being without MSM intermediation…

“But humor me, what is your nationality? I’m interested only insofar as how the US debt crisis is perceived elsewhere by another human being without MSM intermediation…”

I live in Western Canada. The general view here is pretty well the same as the general view in the US. I disagree with the prevailing views.

“If you’re with me up to this point, then I wish you would have said so a while back. Perhaps you alluded to it and I missed it.”

I did say so as explicitly as I could, but not on this part of the thread:

February 25, 2010 at 11:27 am
February 25, 2010 at 3:02 pm

Now the rest:

“But we actually agree that one thing is for certain: AUSTERITY will eventually make its way to this country irrespective of what modern monetary theorists might have US believe… The bill does come due. To pretend otherwise is myopic. Do we agree on this?”

YES!!

“The time frame? 5-10 years down the road?”

It’s already started. My vew is that there will be a “cataclysm” on the Federal side within 6 months of England toppling (only Europe’s weakness is delaying this, I think. Once the markets react to that, England has maybe 6months of its own). So overall, I’d say the US will be a disaster zone within 3-4 years tops (probably earlier). Many individual states will be clearly screwed within the next 6 months, and I don’t have any idea how that will play out.
The Feds will probably bail out the states, especially since a few of them have a disproportionately large number of electoral votes.

“It’s likely that the “bottom” will bear the brunt of such AUSTERITY. I’m assuming that we agree on this as well.”

I disagree here. The bottom don’t have much to lose, really. The rich will of course lose the most in absolute terms, but of course they can ride out a large loss–wich, presumably, is one reason why people want to be rich in the first place. The group that will be really screwed are the foreign creditors, who are mostly much poorer than the nations (europe and US) that they are lending money to and which to some degree freload off of the US’ desire to maintain a large presence in the Pacific. Once this thing ends, I’m going to try to buy military stocks in Asia.

Will the bottom 70% be forced out of their homes? Probably not, since there is nbody left to buy them. Will their cars get seized, etc? Same problem. The pensions will be gone, and any savings will be gone, but there aren’t that much savings to begin with. Food is the biggest question mark–food prices are going to soar, but the US is a major exporter. My guess is that the government will simply make it illegal (or punitively expensive) to export a lot of food, so I don’t think they’ll suffer too much in this respect–at least not initially.

Medicine is probably not a large issue either, just because the bottom 70% constitute a large part of the market (prces wil simply drop to reflect reduced pricing power).

I guess the number of college educations will decline, but that’s probably a good thing–trades are much more useful and important to a country’s well-being than a management degree.

“Nor do I believe that default or debt repudiation is in the cards or that doing so will mitigate the effects of AUSTERITY.”

I believe that default is inevitable (there’s no other way out except for hyperinflation, and default will be more politically popular, even if it eventually leads to hyperinflation), but I agree that it will do nothing to mitigate the effects of austerity. This is basic math–we’ve lived way beyond our means, and there’s no way to avoid regressing back to where we were before al this borrowing occured.

“It may actually make things worse!”

Agreed for society as a whole. Those who are mobile and skilled in certain areas may do very well, though.

“The republic will be tested and constitutional government may hang in the balance.”

I don’t know how to answer this. I don’t know of many countries that have not lost any land over a 250year period. I don’t know a single country that has maintained a debt/gdp ratio of over 100% for long, either. I guess that sums my views best.

“Now as to the causes and roles played by the various parties to this dance I suspect we may disagree. But it will not change the outcome: AUSTERITY.”

True, but understanding the causes and roles are important, because they let me identify the next big set of problems when they come again in a few decades. This period is going to be considered a watershed event in the future–might as wel start understanding it now.

Mused on your comments overnight. In other threads you referred to “simple math”… Is one of the structural forces in your math POPULATION? As in aging population in Europe, US, Canada, Australia, and Japan coupled with much lower population growth [some would say insufficient] in these countries with the result that fewer workers will be able to pay higher taxes to support the “baby boomers” in their retirement. Add to this the fact that with a smaller younger population the overall demand for new housing and the appliances, etc to go with it will be much less as a result. Indeed, there will be a glut of housing and reduced demand throughout the economy as a result. [I recall a report/study conducted by McKinsey that focused on this topic (population) with conclusions that are very sobering! Perhaps someone else knows what I’m referring to and will point us to it if available.]

Deficit spending is merely the hammer insofar as this population factor is the anvil in this equation. Increasing taxation on the workforce in all these countries has its limits. Likewise with the wealthy, as investment has been decoupled from production at the national level. Capital can now seek a higher return on a global playing field. As we both have suggested, deficit spending has its limits as well. Borrowing/begging the Chinese and Indians to “lend” US the monies to pay for the benefits promised to the “baby boomers” would also seem to have its limits, particularly as “lending” implies that the debt incurred will be paid back some time in the distant future. I know the Chinese [Asians in general] have a much longer time horizon than most of us in the West, but this assumption will surely test that time horizon.

Of course, if the Chinese and Indians were TAXED to pay for the benefits/pension obligations incurred by the countries identified above, in effect globalizing the transfer of payments from the periphery to the center, then it would no longer be a debt incurred would it? Such obligations would be PAID out of their reduced consumption. After all we’re ALL in this together, right? From the notion of the “white man’s burden” to the “tax burden of the white man”! That would be a real twist… not that I expect the Chinese, Indians, or anyone else to subscribe to such thinking. I’m not a regular at Bohemian Grove, Davos, or the Bilderberg Conference so I wouldn’t know if the topic has come up.

But once the baby boomers died off and the population bulge and distortions accompanying it eliminated naturally, the world could get back on track. I always knew my generation had changed the world, but only now am I beginning to realize how. I was so much younger then!

It’s really hard to find any kind of rational English commentary regarding Spain. The protests on Tuesday were not staged against the crisis or the government’s response to it. The only issue is that the government is proposing an increase in the retirement age to 67 from 65. The changeover would take place at the rate of two months a year over 12 years, beginning in 2013. Quite simply, it was a protest in defense of what is thought to be the unassailable right to never be prejudiced by circumstances in the real world.

Do not think for a minute that the unions are inciting rebellion among the masses of unemployed young people, or anything of that sort. Their support base consists of those with secure work contracts who, in large part, are not affected by the recession and for whom it is not in their interest that the true Spanish economic crisis be resolved rapidly.

“That is a long winded way of saying those who view the protests as a futile protest against the inevitable may be looking at the wrong metrics for success. While they seem unlikely to achieve their narrow objectives of forestalling budget tightening, they may succeed in making sure that the burden of compliance does not fall unduly on the working man.”

No, these protests *are* futile, because they’re basically protesting the end results of a Ponzi scheme. The governments promised way to much to their citizens over the last 60 years or so, and they were able to get away with their chicaneries due to demographics and the credit markets. BOTH of those trends are now working against them, and anything that may have helped them in the past, such as increasing immigration and scaling back on other spending to meet those promises, were shouted down.

There’s no way out of this, no matter how many people protest, and no matter how they choose to protest. Protests don’t violate mathematics.

Do you actually think out your views, or do you just randomly spew out the same demagoguery to anyone who seems not quite as left-wing as you are?

Killing off the top 10,000 isn’t going to change anything.
States have promised a whole lot to their citizens that they couldn’t afford. They issued debt to temporarily provide those promises, and they tried various methods of protecting industries to save uncompetitive jobs to keep the machine spinning.

The majority of these promises came down to thing like universal education (including heavily subsidized post-graduate education), health care, early retirement with plenty of benefits, and everything else that comes with a welfare state. SOMEBODY HAD TO FOOT THE BILL FOR ALL THIS, AND IT WAS POLITICALLY UNPOPULAR TO TAX THE CITIZENS FOR IT Those 10,000 you mention don’t need the subsidized education or health care, and tehy sure as hell don’t care about the retirement age, since they could choose not to work if they were so inclined. They weren’t the beneficiaries of such policies (were it otherwise, the parties representing the Right would have been clamouring for even more of these benefits, and they were not doing so).

So, in essence, the bottom of the pyramid were living beyond their means, with the state acting as an intermediary. That worked fine for a while because the states started with relatively little debt and there were more young people to support the older ones who got, in essence, a free ride. That’s coming to an end, and no matter how you slice and dice the shrinking pie, living standards must now decline, at least for a while.

And the future of the West has nothing to do with 10,000 people battling 1,000,000,000 peasants. It has to do with the 60-70% of the old population, who want everything they were promised (implicitly or explicitly) fighting the 30-40% of the young who don’t want to support them or pay off their insane obligations.

Perhaps that seems a little less sinister and melodramatic to you, and it perhaps makes your simple solutions a little less easy to implement, but that’s the likely course of events.

Well, there you go again, Mr. Here We Go Again … you sound a bit like a recycled Ronnie Reagan speech … but not as perceptive, if that is possible, given that you have assigned me a left of left label … how wrong you are …

My ‘math’ response to you, Mr. Here We Go Again, was to your gasping, roll over like a kicked chicken, get shit on and die, defeatist attitude. “Oh poor me there is no way out of this terrible mess!” Well boo fucking hoo! Sorry, but that’s an attitude the pharaohs like to instill in the slaves. It keeps them anxious, fearful and immobilized. No thanks Mr. Here We Go Again! I think the answer is to get out on the streets and take down those 10,000 self serving elite pharaohs who are calling the shots.

I believe there is plenty we can do, and job one is to eliminate the very few wealthy ruling elite who are now firmly in control of the global credit spigot. A control gained by buying, and now tanking, governments all over the planet. A control used, yes, to sucker the marks, all over the planet, into a lot of useless consumption (that’s what a debt trap is Mr. Here We Go Again). A control used to misdirect the use of global resources to create all of those crap and unnecessary products that baited those marks traps with the junk they consumed. A control used to create counterfeit derivative products and sell them into the bubble debt areas so as to intentionally decimate those areas. A control used for control and not profit. Earned wealth spread and control of assets is what it is all about Mr. Here We Go Again. Bye Bye billionaires, and bye bye to all of the ass wipes that have been brainwashed into revering them like gods, instead of the over consuming, devious, selfish, corrupt scum bags that they are.

And guess what, when all is said and done, and the people are no longer brainwashed and regain control of their own destinies, and so then have the proper incentives, they will create LIVING STANDARDS FAR SUPERIOR to the wasteful living standards that the 10,000 pharaohs have laid out for them in the past.

“as to your gasping, roll over like a kicked chicken, get shit on and die, defeatist attitude. “Oh poor me there is no way out of this terrible mess!” Well boo fucking hoo!”

Funny that you view my posts like this, and clearly have no idea how you yourself come off. Do you believe that you should be the only one to express an opinion?

“I think the answer is to get out on the streets and take down those 10,000 self serving elite pharaohs who are calling the shots.”

And I think you’re wrong. Now how about explaining how this would change anything? Or do you not ever bother to consider the consequences of your proposed actions?

“I believe there is plenty we can do, and job one is to eliminate the very few wealthy ruling elite who are now firmly in control of the global credit spigot.”

they aren’t in control of anything. The only influence “they” (presumably you mean the IBs?) have is that they can beg insolvent governments to save their collective asses when the inevitable consequences of their stupidities come to light. Governments can’t keep bailing them out, though, because they don’t have the money to bail them out. This is simple mathematics. The creditors are going to get hosed.

“A control gained by buying, and now tanking, governments all over the planet.”

Do you have a source for this? Or is this all in your head?

“A control used, yes, to sucker the marks, all over the planet, into a lot of useless consumption (that’s what a debt trap is Mr. Here We Go Again). A control used to misdirect the use of global resources to create all of those crap and unnecessary products that baited those marks traps with the junk they consumed.”

Wow. I had no idea that Morgan Stanley forced me to buy my cell phone and car. I was delusional enough to think that Nokia and Honda tried to entice me with good deals. Do you have any proof for your allegations? Or once again, is this all somewhere in your head?

“A control used to create counterfeit derivative products and sell them into the bubble debt areas so as to intentionally decimate those areas. A control used for control and not profit. Earned wealth spread and control of assets is what it is all about Mr. Here We Go Again.”

“Bye Bye billionaires, and bye bye to all of the ass wipes that have been brainwashed into revering them like gods, instead of the over consuming, devious, selfish, corrupt scum bags that they are.”

Huh???

“And guess what, when all is said and done, and the people are no longer brainwashed and regain control of their own destinies, and so then have the proper incentives, they will create LIVING STANDARDS FAR SUPERIOR to the wasteful living standards that the 10,000 pharaohs have laid out for them in the past.”

Again, be specific. What the hell are you talking about?

“Go try a little John Lennon, “Imagine”, Mr. Here We Go Again.”

Wow. The solution to the world’s financial problems is to listen to crappy 70’s music. And all this time I was brainwashed into believing that financial problems had something to do with money and decision making.

“Deception is the strongest political force on the planet.”

And you, buddy, are clearly delusional (or at least so incoherent as to come off that way)

Well, there you go again, Mr. Here We Go Again … you ARE a recycled Ronnie Reagan speech … swinging that victim bashing sword of personal responsibility like the Ark Angel of Righteousness for the Rich …

… the bus is heading in a direction to go over a cliff. The driver, with a parachute of wealth, made up of the passengers wallets, is drunk on elite power and steps on the accelerator. His diabolical plan is to bail out of the bus as it goes over the cliff, kill off all the passengers and go back and selfishly enjoy all they have left behind …

… some passengers become alarmed and say,”Let’s stop that greedy elite bus driver, he’s got a parachute made of our wallets, and he’s heading the bus over a cliff. He’s trying to kill us!” The bus is now much closer to the cliff and picking up speed. You can hear the engine whining faster and faster. As the passengers rush towards the front of the bus, to wrestle control away from the drunk on elite power driver, there suddenly appears, the Ark Angel of Righteousness for the Rich!

Swinging his mighty sword of victim bashing personal responsibility he shouts, “There’s no way out of this, no matter how many people protest, and no matter how they choose to protest. Protests don’t violate mathematics.”

But then i on the ball jumps up and screams out, “Don’t listen to this dork, he is really the Ark Angel of Righteousness for the Rich, we CAN violate mathematics, here is the formula, and he shouts out, ”6.7 billion slaves minus 10,000 pharaohs = 6.7 billion free persons! The bus driver is a pharaoh! Let’s go get him!”

But the Ark Angel of Righteousness for the Rich is not done yet, he again swings his mighty sword of victim bashing responsibility and screams out, “Its all your fault, you never should have got on the bus!

The passengers all laugh and rush past him towards the drunk on elite power bus driver. One of the passengers, a little girl, looks up at the Ark Angel of Righteousness for the Rich while she is passing him by and says to him, “Your a dork! Don’t you know that some pigs are more equal than others?”

And so, from that day forward, everyone ignored the Ark Angel of Righteousness for the Rich.

I will try to explain one point of view that isnt discussed in anglosan world. But is very imprtante for us, portuguese.

Portugal has two types of problemas. Internal problems, like lack of productivity towards his european partners; and external causes, because were in an currency area with flaws.

We all know that Mundell was the economist who worked about that problem in his work: “A Theory of Optimum Currency Areas”. Others followed like Barro and so on. But when europeans tried to form the €uro Area established the Maastrich Pact. In that pact we focused the criteria to be membership. Three criteria were established: inflation, fiscal deficits and public debt. Vut these itens werent good enouph, as all were discovering. And had a flaw that wasnt discussed about long time.

I remember the public discussion in Portugal and Great Britain, during the implementation of the idea. I was living in London, that time and I was very skeptical about €uro area because I didnt believe in optimmun currency areas. As the most in the City. However I knew that Portugal needed to have acess to international credit markets to expand his economy. And was a good chance to put some market oriention ideology in those times, when we still had a lot of communist views on economy.

But when I returned to Portugal I allways argued that the main problem wasnt inflation but capital balances and productivity. And… Debt. I still do. I dont belive in Philips Curve and other mamboo jamboo from academy.

But almost everyone thought that productivity will improve automatically, as investment rises and better education for workers. For investment purposes to be inside the €uro area was critical. I agreed but to maintain good acess to international markets is critical. But the capital balance ou capital deficit is more important. As the level of global debt.

The academic world believed that global debt and capital inbalances arent problems because we live in an currency area. As the inflation and public debt was in control. That was the view then. Not only in Portugal as in almost all Europe. I disagreed and I kew that one day we will have a credit crunch and debt will be problematic because the risk of that debt.

So as the economic ideology from mainstream Thougth believed that global debt and capital inbalances werent problems inside the €uro area, everyone in Portugal started to think, not in global debt but only in equitie-debt relation. And as returns will follow that debt to invest, that debt was covered by those returns and having acess to €uro area. Thew saw global debt and capital balances as natural during high investment períod. However, all we know now that isnt true, because in a credit crisis is the level of confidence the root of the aversion to the risk. So, in Portugal, we spend a lot and we took the debt as leverage to improve growth and productivity. It was an error that cost more during a credit crunch.

Today portuguese understand that was a mistake. A great mistake. During almost fifty years we had a conservative policy towards debt during the dicatorship. And that dicatorship was established to figth the debt acumulated from 1910 until 1926. In 1926, a revolution took place in Portugal because the public debt and fiscal inbalances were destroying our economy. So, in 1926, miltarship was established after the revolution. They put a guy as finance minister and he made a great job to control the fiscal deficit and debt. As a praemiun the give him all the political powers to establish a dicatorship.

Today we know that inbalances arent helping the economy and the political system. Join to the euro area was very clever but the academic flawe about optimun currency areas made the portuguese to believe that debt and capital inbalances arent problems. Until a credit crunch blows up and we find that capital markets avoid risks about the high level of debt.

Thats why we got an high global debt level. Public, private and corporate. The public debt rose especially from 2000 forward. But as we remember 1926 and the dictorship all the main political forces know that debt must come down. because isnt only the economic problem that is on the table. Is the ours young democracy in the stake. We know what happened in 1926 in Portugal and in Germany in 1933. And we know that kind of crisis is what are we living. Not only Portugal as others cowntries. But we must to avoid to fall in a dicatorship and wemust avoid to have that debt to avoid gradual impoverishment.

So today in Portugal we got two types of economic problems. Internals and externals. The external are the flaws of €uro area. What we know is: cut debt and rise the returns of investment. And the other side of that coin, improve the produtcitvity. And as we know our problems so we will try to avoid default or another critical economic problem. Everyone knows that we will suffer because the meltdown of credit markets will put pressure in sovereign debt. But we will pass that crisis and save the democracy in Portugal.

In the world of investments just some discuss the optimun currency area flaws. In that case, €uro area. The mainstream media dont understand what we are talking about. And others only want to profit by trading agaisnt some sovereign debt. But just a few have theorical knowledge to understand what is happening in Portugal, concerning that crisis.

The world view exposed above is that right wing politicians (both democratic and dictatorial) are fiscal conservatives. How does this scale to those pesky facts during democracy in this particular country?

[Both tables above use different methodologies thus different numbers, but they agree in trend as you can easily note]

You will notice that most of the worse years, deficit wise, go from 1986 to 1995 – 1989 being an exception.

With the exception of 2009, there is an almost perfect correlation between the biggest deficits and government type: Conservative governments = big deficits.

To put this in American terms, it is like comparing Clinton surpluses with Dick Cheney’s “Deficits do not matter”, and then say that liberals are the main cause of past deficits (though we never were good enough to run surpluses – like the US and Spain were).

What I say is: all we know now that was a mistake these current levels of debt. And the current government as the main opposition party want cut the debt and fiscal deficit. I dont discuss political issues. Only economics and investment ideas about Portugal.

First of all, you don’t tell other people what they can discuss here: It is for the blog owner to say what is acceptable or not.

Second, I did not present that much politics (only a little bit compared with your piece which presented opinion backed by no hard evidence): it was mostly data and I noted a correlation and a similarity to American politics.

I am not interested in going the ad-hominem way: I invite you to provide evidence that supports your opinions.

It is interesting to note how PIGS become PIIIGS (Ireland and Iceland). One of the many problems of the PIGS acronym is that it doesn’t help that much in tracking where the problems are (as they are literally everywhere). That is why STUPID appeared: guess what Dubai, US/UK may also be a source of problems (as many other places you can think of, because we entered black swan land/extremistan – planetwide).

PIGS is mainly a propaganda construction to divert attentions away from the source of all this: a highly interconnected financial system where morals evaporated. It also serves the interest of some views who want to shift attention from the Wall Street/London City created problems, to elsewhere.

The PIGS label is also an attempt to weaken the EU project, and it is working. I would venture further (speculate, if you will) and say that it is an attack on Germany by proxy: weaken the Eurozone politically and you are weakening Germany. This might backfire: If the eurozone holds together, a weaker Euro is a blessing for export competitiveness. A Euro at parity with the USD would do wonders, as long as the union holds politically.

PIGS, in my view, is particularly unfair for Spain: yes they might have unemployment and a property bubble, but they managed their finances well (even having surplus years and a low state debt), have a nice policy in place regarding energy (so important for the future). For the proto-racists out there: at least remove the S. You still end up with your nice slur, but the level of unreality will be lower.

My faith much resides in people like Angela Merkel: someone who has proven that she can be up to the moment. That is the kind of leadership the EU needs.

“PIGS is mainly a propaganda construction to divert attentions away from the source of all this: a highly interconnected financial system where morals evaporated. It also serves the interest of some views who want to shift attention from the Wall Street/London City created problems, to elsewhere.”

Just as blaming the Anglo-Saxon banks serves the interest of some views who want to shift attention from the eurozone’s self-inflicted problems.

“The PIGS label is also an attempt to weaken the EU project, and it is working.”

If a name could “weaken the EU project”, then maybe it wasn’t a strong project in the first place.

“This might backfire: If the eurozone holds together, a weaker Euro is a blessing for export competitiveness. A Euro at parity with the USD would do wonders, as long as the union holds politically.”

Translation: napalm the Greek public sector to help German, French, and Dutch exporters.

“My faith much resides in people like Angela Merkel: someone who has proven that she can be up to the moment. That is the kind of leadership the EU needs.”

I am not trying to defend profligate spending by over-indebted states.

Much less targeting the UK or US as countries. I live in the UK and have spent quite some time in the US, a country that I try to visit as much as I can, as I love it.

I am just noting that the elephant in the room is the system put in place by Reagan/Thatcher (and prolonged since then): Increased inequity (“Trickle-down”), centralized and interconnected banking and large trade deficits.

Can we please go back to smaller banks, real competition and honest profits by producing real things, not “financial innovation”?

And needless to say, the political drama is at a minimum going to make it much harder to craft an economic deal… And the rising tempers on both sides are certainly not helping.

Maybe this is the Greek government’s real objective? Papandreou and underlings seem to want the Bundestag and the German public to oppose funding a bailout. Every day they find new methods to further inflame German public opposition, and without sending Diego Mendez to Germany on a lecture tour.

Papandreou departs a bailout meeting in Brussels publicly blaming the EU. Papandreou’s government appoints former GS personnel to the public debt agency. The Deputy Prime Minister lashes out at Germany…

This is not the behavior of intelligent politicians trying to persuade other (German) politicians to fund a bailout against super majority opposition by their constituents.

It’s time to consider whether this is their goal. i.e. they’ve decided they can’t get there from here on becoming more like Germany by austerity measures. Therefore they’re constructing their post-Euro narrative. They still need this unless they intend to completely retire from Greek politics post Euro split.

Personally I think that would be a reasonable conclusion the Greeks’ part. Namely, recognizing they’re not Germans and can’t operate their society like Germans with German results.

Otmar Issing is also International Advisor to Goldman Sachs Int. since 2006

Thanks for that.

Since it became clear to me that these swaps (as in GS Greek type) had EU “blessing”, I’ve really begun to wonder what ties, if any, existed between ECB/EU & GS/JPM/Deutsche etc.

Especially in last week or so, much more details of finer points of EU/ECB mechanisms becoming clear (not just absurd headlines here on Greece). I suspect these kinds of relationships occurred… I mean, they were literally cause/affect here (US) back to Clinton.

So there’s precedence. And once a Fox learns how to get in the chicken coop, they teach the pack members how to do the same, then they eat the chickens.

Ives,
“Germany and other EU surplus countries”. What surplus? Germany is also running deficit (and above 3% declared as a max for eurozone) AFAIK, the only EU country with surplus is Norway. The only reason for pointing Germany is that this country can borrow significantly cheaper than Greece.

I lived in Greece in the mid 90s and in Spain for most of the 80s and early 90s. My impressions are that Spain is a more reasonable place, where, separatist sentiment notwithstanding, the national destiny is recognized as their responsibility, not Germany’s. Not to say they would turn down a helping hand. In Greece it seemed that the family was the organizing unit and national thinking was reserved for hating the Turks and getting angry about Macedonia…slight exaggeration. If paying taxes took money from the family and gave it someone else, then paying taxes wasn’t good. One of the first phrases I learned in Greek was “Do you want the price with or without a receipt?” It seems that the Greeks have concluded they need some more money and that it is the Germans who have that money (and Germans aren’t family). It does seem peculiar that they are approaching this problem in a manner to make the Germans less willing to provide the money, but stranger things have worked in the past.

One of the first phrases I learned in Greek was “Do you want the price with or without a receipt?”

Probably the leading phrase that is supposed to be outlawed by fiscal “reforms” imposed at the EU’s behest. Procustes clearly took advantage of the Schengen regime to relocate to Brussels.

The current policy trajectory – if ever implemented – seems designed to convert all Greek cabinet ministers into local EU tax collectors. And with approximately the same domestic popularity as Roman tax collectors in Judea circa 23 AD.

As always with the Rube Goldberg EU project vital implementing details are left out. In this case several veteran legions and auxiliary cohorts ready to nail several thousand Greek tax resisters to handy walls as public examples. And perhaps line a few hundred kilometers of public highways with a cross and crucified tax resister at every kilometer post.

It seems that a long fuse may have been lit, but the reports of paralyzing strikes in Spain, Portugal etc may be comparable to the “SNOWICAINE NOW POUNDING PHILADELPHIA”. The Greeks do seem to be winding up a, how do you corporate types say, “push back”?

The point of protesting in the streets, loudly, with signs, with puppets, with bullhorns, violently, peaceful or both at the same time in the case of really large diverse crowds is to get the message across that people are working at opposing what is being done to them as opposed to the usual quiet life of desperation and mute acquiescence. As they say, I will take your silence as consent. The point is not give consent. The means may not be as effective as dropping a surge of Marine Battalions with CIA drones to force the point, but then, we do not control those kind of resources, now do we? So we start with what we have, our bodies and our voices and we march. For starters. In the absence of the capacity to make war, protest is the continuation of policy by other means. It shows an earnest of intent, an end to the silence and the withdrawal of consent. In other words, the gloves come off and are thrown down. Ask the Iranian opposition what it means to go to the streets or the forgotten of Tiananmen Square. It has to start somewhere and escalate to a conclusion.

1. Just for your foreign readers.
The Wall Street Journal was taken over by Rupert Murdock some time ago. Mr. Murdock has rarely if ever lowered himself to respect journalistic ethics or truthfulness. WSJ seems to have a similar standard as the Daily Mail in the UK or Fox “News” in the US.
2.As far as the Greek protests go, there seems to be two possible “Protestees”.
First is the Greek government in attempts to finally tax the upper classes. I found it interesting that the original strikers were the tax collectors and customs officials.
Perhaps they had good reason to protest the possibility of loosing a major source of income.
The Second, and from what I have read more important target is Germany and other northern countries. This sounds like Entitlement rage. But demonstrations in Athens cuts little slack in Berlin. I am sure even now there is a major effort to develop ways to build a firewall around Greek participation in the Euro.
I think that the best example for Greece is Iceland.

I think that the main events are probably reserved for former Soviet block states which from economic standpoint were basket cases after the independence (lost and never recovered most of thier markets, suffered from deindustrialization, dollarization, crushing foreign debt).

60,000 people were estimated – 9,000 at the most conservative (by police). My colleagues in Barcelona & Valencia have reported the same & more from protests there.

As a worker here in Spain with only 10 yrs. left until retirement, I am delighted to see these protests. I entered the labor market here over 2 decades ago with the understanding that I could retire at 65. I pay about 1/3 of my salary in taxes to the Spanish government. Diego, if you want to keep working until you’re 90, yes, go ahead & tell the world that only 100 people showed up to protest. Unfortunately, that’s not the truth.

However many actually protested–at least it’s more than us wussy Americans.

The Supreme Court “elects” Bush: no protests.
Bush and Congress shred the Constitution: no protests.
Bush lies us into war: no protests.
Congress bails out the banks: no protests.
Congress can’t help the millions without health care: no protests.

Other than crazy teabaggers, who think we have a Muslim foreign-born president ready to take away their guns, and a few pitiful objections from the left, the majority of Americans just sit and watch TV while the country disintegrates.

I am a worker from Greece. Enough with this war against workers in EU. We have to stop the capitalists. They will take back all workers rights. New middle ages for workers in Europe. Workers of Europe must be unified and fight against capitalism. They want social war they will have it.